One of the most common questions I get asked is if Medicaid is going to take the home. For many families, their home is their most valuable asset. But even if you have assets worth more, you probably don’t have the same emotional attachment to your retirement account as you do to your home. It’s easy to see why! You live in your home for many years, and your time there is full of memories. The thought of Medicaid forcing you to leave your home is frightening. Unfortunately, a lot of bad information is out there about Medicaid and your home. So let me be clear: Medicaid will not take your home. Hopefully, this blog post helps you better understand how Medicaid treats your home, how you can protect your home from Medicaid spend-down, and how to be ‘Medicaid smart’ if you do decide to sell your home.
Medicaid has Special Rules for your “Home”
Medicaid’s resource rules count any equity you or your spouse have in a house or other real estate as an available resource. However, the rules have special provisions for your home. Your home is your principal place of residence. If you have multiple houses that you spend time at, only one of them can be your home. While other real estate is always a countable resource for Medicaid, your home is very often exempt from being a countable resource. Medicaid does not count your home if:
- You live there
- Your spouse lives there
- A relative who depends on you for shelter lives there
- You are in a nursing home, but you still intend to return home
That last one can be a bit confusing. People go into a nursing home because their care needs have become too much for them to safely stay at home. They probably will be in a nursing home for good. However, their Home is still exempt if they ‘intend’ to return there. Whether they actually are able to return home does not matter – so long as that person intends to return home someday, the house is exempt from Medicaid. However, after enough time (typically a year) has passed since they left home, the house will lose the exemption and become a countable resource. If smart planning isn’t done, that can cause Medicaid benefits to stop until the house is sold, and the proceeds spent down.
How to Protect your House from Medicaid
If your house is not exempt because it is your home, Medicaid will count your equity in the home as a countable resource. Your equity is the fair market value the house, minus any money still owed on it. If you own the home with another person (other than your spouse), your equity is the value of your share. So, if two siblings own a $100,000 house with a $40,000 mortgage, their equity would be $30,000 each.
Medicaid will count your equity in the house as a resource. If you sell the house, you have to receive at least your equity share. If you receive less, you will get penalized by Medicaid. If you transfer the house to another person, Medicaid will penalize you based on the amount of your equity when you transferred it.
There are exceptions that will allow you to transfer your home without penalty. You can transfer it to your child who is under age 21, or to a child of any age who has been determined to be disabled by Social Security. You can transfer your home to one of your children who has lived with you for at least two years and who has provided care that kept you from needing nursing home care. You can also transfer your share to a sibling who is a co-owner of the home, and who has lived there for at least a year prior to the transfer. If no exception applies, you can still do Medicaid planning to gift the entire home or a portion of the proceeds from the sale of the home and avoid spending that amount down for Medicaid.
Trust the Experts – Don’t go it Alone
The Medicaid rules are complex and easy to get tripped up on. It is easy to make mistakes that can result in being denied Medicaid coverage when it matters most. To avoid making Medicaid mistakes, get help from the experts. To make sure that you are making smart moves with your home, be sure to seek out guidance and advice from an experienced and trusted Elder Law attorney.